What is a Greenback?
The term "greenback" is a slang word for the United States Federal Reserve Note, commonly referred to as the US Dollar (USD). Greenbacks also have a historical connotation, however, referring to the debate over economic policy throughout the Civil War Era. The name comes from the green color of the ink used on Demand Notes, which were issued by the US government from late 1861 to early 1862.
Origins of the US Dollar
During the US Civil War, the debate over the greenback and the gold standard came to a head when the United States government struggled to pay debts acquired from union military operations. At the time, Demand Notes were supposed to be redeemable for gold coin "on demand," which was a problem for the government.
The Legal Tender Act was passed on 25 February 1862, which permitted the Secretary of the Treasury to issue Legal Tender Notes, which looked very similar to the Demand Notes they replaced, only they were not redeemable for coin. A few days later, the United States Treasury authorized the issue of $150 million USD worth of paper Legal Tender Notes, which paved the way for modern day currency. Just a few months later, on 29 August 1862, the first modern day currency was produced when the Chief of the Federal Bureau and five clerks printed paper notes in the basement of the United States Treasury Building.
Banks and bankers originally scorned the new greenbacks. At the time of the initial circulation, people used both gold dollars and greenback dollars. By 1867, over $350 million USD worth of greenbacks were making their rounds through the United States. Some confusion ensued as the coin-backed Demand Notes clashed with the new greenbacks on the national market.
Legal Tender "greenbacks" were not backed by coin until Republican president Rutherford B. Hayes backed the 1875 Specie Resumption Act in 1875. After the Civil War, creditors were still clamoring for coin-backed currency, and the United States returned to the gold standard in 1879. Some Americans were furious with the decision, and they formed the Greenback Labor Party, which called for a return to the issue of greenbacks and the regulation of certain corporations such as privately owned banks whom they feared would redefine the value of currency.
Federal Reserve Notes
The history of the greenback came full circle when Republican president Richard Nixon abandoned the gold standard in 1971 by preventing foreign countries from trading gold for United States dollars. At this time, Legal Tender Notes were replaced by Federal Reserve Notes, or what is now used as paper money. This paper money continued the tradition of using green inks, thus retaining the nickname "greenback." Federal Reserve Notes went through a redesign beginning in 2003, and as a result only the $20 bill still uses green as its main color.
This is a fascinating history of the paper currency of the United States and how the term greenback originated. I still hear people refer to paper money as greenbacks today, and now I know this word has more history than simply the color of our money.
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